The stock market plunge at the end of 2018 didn’t do people saving for retirement any favors.
The typical retirement account had more money going into 2018 than it closed the year because of market volatility, according to new data from Fidelity Investments.
The average 401(k) balance dipped 10 percent — or about $8,700 — to $95,600 in the fourth quarter of 2018. Balances hadn’t previously fallen year over year since 2015, according to Fidelity.
Corrections in the stock market can make savers anxious. But most of Fidelity Investments’ more than 30 million retirement account holders did not panic last year, says Kevin Barry, president of workplace investing at Fidelity.
“Similar to 2008, they stayed the course by maintaining their asset allocation and continuing to add to their accounts, a good discipline that can be beneficial when markets rebound, as we’ve seen in the early part of this year,” Barry said in a statement.
Average 401(k) balance by age
One of the largest perks offered with 401(k) plans is the ability for employees to reduce their taxable income, meaning Uncle Sam won’t be able to collect taxes on the dollars you contribute. The deferral limit is $19,000 in 2019 for traditional and safe harbor plans, according to the IRS. And workers who are age 50 and older can contribute an additional $6,000 in catch-up contributions.
Some employers provide more incentives to contribute including matching all or some of what their workers contribute. Overall, the goal is for workers to build their accounts as their salaries grow and ideally give an added boost to the economy.
People in the sunset years of their career typically have the most saved while those who are younger are more likely to have smaller balances that will grow with time.
Here’s a breakdown of average 401(k) balances by age:
- Ages 20-29: $10,500
- Ages 30-39: $38,400
- Ages 40-49: $93,400
- Ages 50-59: $160,000
- Ages 60-69: $182,100
- Ages 70+: $171,400
How to improve retirement readiness
People early in their careers should start saving for retirement as soon as possible. And we should all be looking at our budgets to make sure we’re saving as much as possible. Many plans also offer the ability to enroll in a program to automatically increase your contribution amount each year, making it easier to save more.
Find out if your employer matches your contributions. Even a 5 percent match can be a nice incentive to save, and not taking advantage of the perk means leaving money on the table.